How to enforce note? - Posted by Bob Ridge

Real Estate Investing Real Estate Law
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Posted by John Merchant on August 09, 2003 at 17:19:37:

You can’t have it both ways. You’re trying to molly-coddle her on one hand, and collect on the other.

First thing you need to do is decide if you want this note paid, or just want to continue to play footsie with her. She’s playing on your sympathies like a fiddle.

If she’s so concerned about her precious credit score, I think maybe a letter to her telling her that if she doens’t have this paid in 30 days, you’re going to file suit against her, and you have a pretty good idea that won’t do her credit score any good.

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How to enforce note? - Posted by Bob Ridge

Posted by Bob Ridge on August 09, 2003 at 17:00:47:

I recently loaned money to an investor to buy a bank-owned house. The purpose was to get the house under the investor’s control before the contract ran out. Then she would secure other temporary financing or sell the house and pay me with a single balloon payment within 2 months. My loan to her was secured by a promissory note for the balloon amount and a mortgage for the amount loaned.

We are now a month past the due date, partly because she has had a lot of unfortunate things happen beyond her control, but also partly, I believe, because she is not trying as hard as she can to get me out of the picture. She is taking her time to find just the right deal, be it reselling the house or getting a refi.

She is very touchy about her FICO score (640), so she is not talking to as many lenders or investors as she needs to, for fear of having her credit pulled repeatedly. She has already been turned down a couple of times for not having enough trade lines. She has suposedly been approved for a 55% LTV on the property, which would be enough, but that is where she’s left it.

More recently, she has not followed up with an online home equity lender (she owns her primary free and clear) that had an answer ready for her two weeks ago and is still waiting for her to call. Nor is she returning my daily calls more than about once a week. While I still believe she will get it done, I want to get a plan for enforcing the note underway.

Of course I plan to consult an attorney, but what can I expect the best course of action to be? Foreclosing would be a pain, and that would only get me the original loan amount, right? Then I suppose small-claims court would be the venue for retrieving the rest. But I want to avoid all this, as well as the legal fees and hassles (I’m a 90-minute drive away).

She has also put up $6K in rehabbing, so I’d feel even worse about just taking the property from her. She brought up the possibility of me doing a L/O to her, but I don’t want to have my capital wrapped up long-term. I’m not even sure I would trust her as a tenant right now.

So, any ideas about what I should do, or what I can expect if I pursue this legally? Thanks…

Bob